Luxury items 

Reader Response: Alternatives to Interest Rate Hikes

Does raising interest rates to discourage inflation really make sense? In the 1970s, high rates seemed to throw gasoline on the fire and hurt the little guy the most (as a baby boomer, I remember my mortgage at 13%). Inflation is caused by less supply than demand. Higher interest rates do not decrease bird flu, add oil to supply, increase production in China, or solve the supply chain problem. In fact, it will be more difficult and more expensive for producers and transporters to improve supply.

Low-income consumers generally have little discretionary income, so they cannot react by cutting back and will be hampered by higher borrowing costs. Middle- and upper-income consumers will likely buy even more, expecting prices and interest rates to rise. I hope the Biden administration fights inflation with help for low-income families (food stamps for gas?), help to increase supply (help for truckers, farmers and local industries) and incentives to discourage spending (high yield savings bonds, more fight against tax and social evasion or even new taxes for the wealthiest consumers or on luxury items).

I know the Fed is nominally independent, but they might be impressed if the administration has a better plan. Would it help defer the more expensive components of Build Back Better? There must be a better way.

Bob Gill, Portland

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